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My best friends uncle made a fortune in an unusual way that was a hybrid of entrepreneurship and investing.
He started out as a cab driver in a west coast city. After saving some money and borrowing a bit, he managed to buy his own taxi cab ( both the physical cab and the medalion). He then borrowed some money to buy another taxicab (both the physical taxicab and the medalion). With the cash flow from that taxi, he then bought a third and repeated the process until he had one of the largest fleets of taxis in this city.
Eventually a high tech company moved in and the demand for taxi services increased. Since more money could be made driving a taxi and the number of taxi medallions remained the same, he was able to charge drivers more for the privledge of driving a taxicab. He now has at least 1 million in cash flow per year.
He did not have to work 120 hours a week, develop an innovative product or inspire 100s of employees. He contracts out services and has few employees.
His source of income is the independent operators who lease his cabs.
While the way he built his wealth is similar to the process that landlords use to build wealth, he did not have to deal with the hassles of residential real estate. Imagine having to evict some loud music drug user!Since the cab drivers wanted to make money from customers they had every incentive to take care of the cabs they leased.
Additionally, since his niche is less well known and more specialized than residential real estate, his rate of return on each cab was higher.
My questions are:
Would any of you have any suggestions on how what he did could be done starting today: That is building wealth via an asset that is easily leased/rented, yet requires less hassle then residential real estate and with a greater return and then borrowing from the equity of the first purchase along with the cash flow to get a second and so on?
What are some good alternatives to residential real estate that could allow one to build wealth via a similar process?
I would tremendously appreciate any thoughts or suggestions.
Not sure because it seems that those medallions are costly. Recently two in NYC sold for $1mill each. In California as far as I know the limit is 1 per person. Drivers in San Francisco spend 10, 15, or 20 years trying to get their medallion. Remember that the cities have a limit on medalions that they offer. With San Francisco Medallion owners can lease their meddallion and car to another driver and make money that way. You are supposed to still be a driver though, meaning that chances are you would have maybe 2 other people driving your car. No one in San Francisco can get more than 1 medallion. As far as I know that is the same in Los Angeles.
The average income for a driver is around $24,000 a year. Kind of hard to save up for that medallion that can cost big bucks to acquire.
I would say that a good way to make money is to own an asset of some kind that you can sell over and over again. One woman spent her childhood collecting samples of cloth for furniture that would be sent to her parents business. She organized these into a book along with where to get them. Later when she was older she realized that people in the interior design industry want what she had. She has sold over 108,000 copies of her book over the last 6 or 7 years and it keeps selling. She has made more than $1mill selling that book. The best part is that she doesn't have to create it over and over again.
Another man spent his years building homes. He wrote a book about how to hire a contractor. Last I heard that book brings him in $100,000 a year.
What I would do is take what you are good at and develop something that you can market to others. Ask people what they think you are good at if you don't know. Maybe something that you have overcome or some other experience that you have had in life. Write about it and let others know how you handled it, did it, put it together. Chances are thousands of others are looking for an answer and will search out your information.
99% of the people I personally know who are truly wealthy, and I know a few. Either:
1. Inherited it.
2. Got help($$$) from wealthy family.
3. Lucky break(Law suit, Lotto, Right place at the right time..)
In that order.
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